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Exceptional support for Bendigo and Adelaide Bank equity raising

NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES OR TO US PERSONS

Bendigo and Adelaide Bank has successfully closed the fully underwritten institutional component of the capital raising announced on 10 August 2009‚ with exceptionally strong support received from a broad range of global and domestic investors to raise approximately $177 million.

Bendigo and Adelaide Bank group managing director Mike Hirst‚ said the company was very pleased with the support that had been received from institutional equity markets for the raising.

“The continued strong commitment of our existing institutional shareholders was demonstrated‚ with more than 95 per cent taking up their full entitlements. We are also extremely pleased to be welcoming a number of new significant institutional shareholders to our register to support our growth going forward‚” Mr Hirst said.

The institutional raising comprised the offer of approximately 7.3 million new shares (New Shares) under the institutional component of the 1 for 12 entitlement offer (Entitlement Offer) to raise approximately $50 million (Institutional Entitlement Offer)‚ and the offer of approximately 18.8 million shares (Placement Shares) to institutional investors under the placement offer (Placement Offer) to raise approximately $127 million.

The net proceeds of the equity raising will be used to strengthen the Bank’s capital base‚ to enhance its financial flexibility and to take advantage of growth opportunities as markets continue to improve.

The New Shares and Placement Shares are expected to be issued on 21 August 2009 and commence trading on ASX on the same day. As the New Shares and Placement Shares will not be entitled to the FY2009 final dividend‚ they will trade under the ASX code “BENN” until the ex-dividend date for the dividend (expected to be 27 August 2009).

Shares in Bendigo and Adelaide Bank will resume normal trading on ASX today.

Commencement of the Retail Entitlement Offer

The retail component of the Entitlement Offer (Retail Entitlement Offer) opens on 17 August 2009 and is expected to close at 5:00pm (Melbourne time) on 4 September 2009. The Retail Entitlement Offer provides an opportunity for eligible Australian and New Zealand retail shareholders to subscribe for 1 New Share for every 12 existing Bendigo and Adelaide Bank ordinary shares held at 7:00pm (Melbourne time) on 13 August 2009 (Record Date)‚ at the offer price of $6.75 per New Share. This represents the same offer price and offer ratio as the Institutional Entitlement Offer.

Eligible Retail Shareholders may also apply for New Shares in excess of their Entitlement (Additional New Shares). Any Additional New Shares will only be allocated to Eligible Retail Shareholders if and to the extent that Bendigo and Adelaide Bank so determines‚ in its absolute discretion‚ having regard to circumstances as at the time of the close of the Retail Entitlement Offer. Any Additional New Shares will be limited to the extent that there are sufficient New Shares from Eligible Retail Shareholders who do not take up their full Entitlements or from New Shares that would have been offered to Ineligible Retail Shareholders if they had been entitled to participate in the Retail Entitlement Offer.

The Retail Entitlement Offer is fully underwritten and is expected to raise approximately $123 million. New Shares and Additional New Shares issued under the Retail Entitlement Offer will rank equally with existing shares from the date of issue‚ but will not be eligible for the FY09 final dividend.

Full details of the Retail Entitlement Offer are set out in the prospectus which was lodged with ASIC on 10 August 2009 (Prospectus). A copy of the Prospectus and a personalised Entitlement and Acceptance Form is expected to be mailed to Eligible Retail Shareholders in the week commencing 17 August 2009. The Prospectus will also be made available at www.bendigo-offer.com.au. In deciding whether to participate in the Retail Entitlement Offer‚ Eligible Retail Shareholders should read the Prospectus carefully (including the assessing the risk factors outlined in Section 5 of the Prospectus). Eligible Retail Shareholders wishing to participate in the Retail Entitlement Offer for New Shares and Additional New Shares have two options:

• complete‚ or otherwise apply in accordance with‚ the personalised Entitlement and Acceptance Form accompanying the Prospectus; or
• complete‚ or otherwise apply in accordance with‚ the personalised Entitlement and Acceptance Form online at www.bendigo-offer.com.au. The forms will be available online from 17 August 2009.

Key Dates for the Retail Entitlement Offer

The above timetable is indicative only and subject to change. Bendigo and Adelaide Bank‚ subject to the Corporations Act‚ the ASX Listing Rules and other applicable laws‚ has the right to vary any of the above dates without notice. In particular‚ Bendigo and Adelaide Bank reserves the right to extend the closing date of the Retail Entitlement Offer or to accept late applications. The commencement of quotation of New Shares is subject to confirmation from ASX.

Shareholder enquiries

Retail shareholders who have questions regarding the Retail Entitlement Offer should call the Bendigo and Adelaide Bank Offer Information Line on 1300 667 384 (local call cost within Australia) or +61 3 9415 4655 (from outside Australia) at any time from 8:30am to 5:00pm (Melbourne) Monday to Friday or visit the Offer website at www.bendigo-offer.com.au.

NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES

This press release does not constitute an offer of shares for sale in the United States‚ or to any person that is or is acting for the account or benefit of any U.S. person (as defined in Regulation S under the United States Securities Act of 1933‚ as amended (the “Securities Act”)) (“U.S. Person”)‚ or in any other jurisdiction in which such an offer would be illegal. The shares have not been registered under the Securities Act‚ and may not be offered or sold in the United States or to or for the account or benefit of U.S. Persons unless the shares are registered under the Securities Act or an exemption from the registration requirements of the Securities Act is available.

This press release includes “forward-looking statements” within the meaning of securities laws of applicable jurisdictions. Forward-looking statements can generally be identified by the use of forward-looking words such as “may”‚ “will”‚ “expect”‚ “intend”‚ “plan”‚ “estimate”‚ “anticipate”‚ “believe”‚ “continue”‚ “objectives”‚ “outlook”‚ “guidance” or other similar words‚ and include statements regarding certain plans‚ strategies and objectives of management and expected financial performance. These forward-looking statements involve known and unknown risks‚ uncertainties and other factors‚ many of which are outside the control of Bendigo and Adelaide Bank Limited‚ and its officers‚ employees‚ agents or associates‚ including risks associated with the ability of Bendigo and Adelaide Bank Limited to pay the expected dividend. Actual results‚ performance or achievements may vary materially from any projections and forward looking statements and the assumptions on which those statements are based. Readers are cautioned not to place undue reliance on forward-looking statements and Bendigo and Adelaide Bank Limited assumes no obligation to update such information.

Bendigo and Adelaide Bank announces FY 2009 results

NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES OR TO US PERSONS

Highlights

• Cash earnings per share of 62.9 cents
• Net profit after tax before significant items of $173.2m
• Retail deposits continue to grow strongly‚ increasing 20% to $28.5bn
• Net interest income increased by 6.3% to $635m
• Equity raising to provide for future growth
• Credit quality remains sound

Bendigo and Adelaide Bank (the Bank) today announced an after tax profit before significant items of $173.2 million for the 12 months ending 30 June 2009‚ a 26 per cent reduction on the prior corresponding period.

The reduced profit was attributable to a slowing economy and global recession‚ an unprecedented drop in official cash rates and increased funding costs.

However‚ in a sign that the Retail Bank‚ including the Community Bank® network‚ remains strong‚ retail deposits increased by 20 per cent to more than $28.5 billion. This increase in retail deposits has allowed the Bank to reduce its reliance on wholesale funding‚ which remains expensive and difficult to access.

Directors announced a final dividend of 15 cents per share (fully franked)‚ taking the total dividend for the financial year to 43 cents per share. The Board’s dividend policy of paying out 60-70 per cent of cash earnings as dividends remains in force.

Newly appointed Bendigo and Adelaide Bank Group Managing Director‚ Mike Hirst‚ said a deliberate effort to re-shape the business had placed the Bank in the best possible position to grow shareholder value as market conditions improved.

“There is no doubt that the last financial year presented unprecedented challenges for all Australian banks‚ with everything from a deteriorating credit cycle and rapid fall in official cash rates to reduced wholesale funding options impacting significantly on financial results‚” Mr Hirst said.

“However‚ we firmly believe that by being the first to reshape our balance sheet and reduce our reliance on wholesale funding we are well placed for the future.

“The strong retail deposit growth generated in the past year – which in itself is confirmation of the strength of our retail business model – has meant that we have been able to act decisively to meet the sector challenges without relying on others.

“A feature of the last financial year has been our focus on maintaining a disciplined approach to writing sustainable business‚ with available funding being channelled to the most profitable areas.

“Credit quality remains sound‚ particularly so across the margin lending portfolio.

“Our portfolios are showing signs of growth in line with market sentiment. There has been significant margin improvement from the lows experienced in the earlier part of this year. For many of our competitors‚ increased funding costs are still to work their way through their business. This could lead to further changes in asset margins.

“Going forward‚ and particularly after the capital raising announced today‚ we have the flexibility and capacity to take advantage of emerging market opportunities.

“In Bendigo and Adelaide Bank I see an organisation with a sound credit quality‚ a balance sheet with a low level of risk‚ and a high quality capital base. This places us in an ideal position to grow our businesses in a sustainable way‚ while continuing to meet and exceed the expectations of our customers and creating real wealth for our shareholders‚” he said.

Credit quality
Credit quality remains generally sound and is in line with the Bank's low risk appetite. The vast majority of the Bank’s asset base is secured by residential mortgages.

The Bank takes a conservative approach to provisioning‚ and impaired loans as a percentage of total assets continue to be at low levels. As at June 30‚ 2009 gross impaired loans were just 0.49 per cent of total assets.

Last week the Bank provided an update on its portfolio of loans to investors in Great Southern Limited Managed Investment Schemes.

The Bank’s exposure to borrowers in Great Southern Managed Investment Schemes is approximately $550 million. These loans are full-recourse to each individual borrower‚ with an average exposure of less than $70‚000 and are spread across every state and territory in Australia. The Great Southern portfolio represents less than 1.5 per cent of the total Bendigo and Adelaide Bank asset base.

A total of $20.2 million has been raised at June 30‚ 2009 in specific and collective provisions relating to the loans which form part of the Great Southern portfolio.

Funding and capital
The last financial year saw a dramatic restructure of the Bank’s balance sheet‚ with a reduction in reliance on uncertain wholesale funding sources. Retail deposits now represent nearly 90 per cent of on-balance sheet funding‚ with growth in deposits of 20 per cent – or almost $5 billion – over the last 12 months.

The Bank’s capital position remains commensurate with the low risk nature of the loan book‚ with a total capital position of 10.91 per cent and a Tier 1 ratio of 7.43 per cent as at June 30‚ 2009.

Costs
Operating expenses flattened in the second half of the 2008/9 financial year. As widely reported‚ the Bank has asked employees to volunteer to take 10 days in unpaid leave this financial year. The response has been exceptional – with the majority of staff participating in the program. This has obvious financial benefits for the Bank‚ but is also a fantastic advertisement for the commitment and energy that our staff have for the business and its customers.

Revenue and cost synergies from the merger between Adelaide Bank and Bendigo Bank are still being realised‚ and will result in a more efficient business.

Together the merger synergies and cost controlling measures are being done in a way that preserves the capability and capacity of the business to grow in an improving economic cycle.

Business performance
Net interest income for the period was largely affected by a reduced demand for credit and a decline in the Margin Lending and Third Party Mortgages portfolios. Net interest margin was affected by a lag in term deposit repricing in a rapidly easing cash rate environment‚ increasing costs of retail funding‚ and increasing securitisation costs.

The Bendigo Bank Community Bank® network continues to drive superior growth and above system deposit generation‚ while the relative immaturity of this network means there are years of latent growth to be harnessed by the bank.

Bendigo and Adelaide Bank has 1.4 million customers‚ across 188 Bank owned branches and 238 Community Bank® branches. The Bank is being buoyed by approximately 11‚000 new customers per month. Bendigo and Adelaide Bank is managing 1.7 million accounts‚ with approximately 1.9 products per person.

Significant opportunities exist in the Third Party Mortgages‚ Wealth Management and Margin Lending businesses. There is a genuine desire to support a 5th funding alternative in the Third Party Mortgages sector‚ and with improving margins and a reshaped commission structure the fundamentals of this business are rapidly improving.

Margin Lending offers the Bank a low-cost and high margin business with excellent credit performance. There is significant capacity for growth as customer appetite for risk and gearing is restored.

An increased customer risk appetite will also benefit our Wealth Management business – and with other key industry drivers (compulsory superannuation and an ageing population)‚ the prospects for growth remain sound.

Market update - Great Southern

Bendigo and Adelaide Bank (BEN) has released information on provisioning and credit quality relating to loans which form its Great Southern portfolio. Given the Bank has released these details‚ it has also released credit performance and provisioning levels for the group’s entire loan portfolio ahead of next week’s (August 10) annual results announcement.

Great Southern

A total of $20.2 million has been raised at June 30‚ 2009 in specific and collective provisions relating to loans which form the Great Southern portfolio.

BEN’s exposure to borrowers in Great Southern Managed Investment Schemes is approximately $550m‚ spread across 8‚200 growers. These loans are full-recourse to each individual borrower‚ with an average exposure of less than $70‚000 and are spread across every state and territory of Australia. The Great Southern portfolio represents less than 1.5 per cent of the total Bendigo and Adelaide Bank asset base.

The Board has raised the provisions as a prudent response to the likely credit performance of the portfolio.

BEN managing director Mike Hirst said Bendigo and Adelaide Bank had a proud history of industry-leading customer service‚ and would continue to engage with the relevant parties to determine what steps could be taken to protect its interests and those of its customers.

The Bank has established an internal taskforce to oversee the Great Southern portfolio; has recruited a specialist credit/structuring Executive to manage the project (reporting directly to managing director); established Board oversight of the project through a dedicated sub-committee; and appointed external legal and corporate advisors (Grant Samuel).

In addition‚ a help centre has been established to directly manage the questions and needs of the grower investors.

Group Credit

An additional $14.4m has been raised in specific provisions at June 30‚ 2009 due primarily to deterioration in asset values in the commercial property sector‚ and the effect this has had on the performance of a small number of loans held by the bank.

However‚ excluding these loans‚ credit quality remains generally sound across the group‚ with 90-day arrears showing an improving trend across the residential mortgages‚ consumer and commercial portfolios (excluding Great Southern). Credit quality in the margin lending portfolio remains excellent.

Trading conditions

Trading conditions for the remainder of the bank are in line with forecasts provided in the April 2009 update.

Net Interest Margin continues to improve in line with April forecasts. Following the dislocation of global financial markets last year‚ the bank moved to restructure its balance sheet such that it is now predominantly funded through retail deposits. Consequently‚ while securitisation costs remain high‚ they represent a relatively lower proportion of the bank’s funding.

Guidance

The additional collective and specific provisioning outlined above will impact on previously advised cash earnings of 70-75 cents per share for the financial year ended June 30‚ 2009. The impact represents approximately 8 cents per share‚ with forecast cash earning per share for FY09 now approximately 63 cents.

The business has also completed its impairment review‚ and doesn’t expect any goodwill impairment in FY09¹.

Full details of the financial and operational performance of the business will be provided on August 10‚ 2009 when the bank announces its annual results.

A PowerPoint presentation regarding this announcement is available on the ASX website.

¹ Subject to final Audit Committee approval

Bank positions itself to ride economic upswing

Bendigo and Adelaide Bank today announced measures to ensure the company is able to fully capitalise on opportunities presented by a recovering economy.

Bank spokesman Owen Davies said the slowing economy and a flattening of demand for credit meant the bank currently had excess staff capacity.

“We need to take some short-term measures that provide us with some flexibility in our cost base – to reduce costs in the short-term but retain as much capability as we can to accommodate the growth that will come our way as the economy recovers.”

Staff have also been requested to take 10 days unpaid leave over the next 12 months‚ with the salary reduction to be spread evenly across the year.

“The scheme is voluntary‚ but we anticipate a strong take-up‚” Mr Davies said.

“All businesses – not just banks – face these pressures and have responded in different ways to adjust their costs to fit uncertain revenues.

“Some have cut their services‚ some have reduced employee numbers‚ some have sent jobs offshore and others have asked their employees for their support in order to position them to grow as recovery comes. Bendigo and Adelaide Bank wants to be in that last category.

“Demand for our banking models‚ distribution channels and products is strong and we can expect renewed and vigorous growth as our funding capacity and markets recover.

“But in the short term‚ uncertainty remains‚ and we need to ensure we remain responsive and flexible to changing market conditions. In particular‚ we need to manage our costs according to the income we receive.

“Bendigo and Adelaide Bank has a committed staff and we have every confidence staff will respond well to ensure the bank can take full advantage of the economic recovery.

“We have created 4000 jobs over the past decade and we believe Australians will agree with the way in which we have responded to the downturn.

“Like us‚ a lot of firms have now worked out there is a huge cost in the traditional response‚ which is a redundancy program.

“That leaves companies unable to take advantage of opportunities when as things turn around. They also face costs in hiring and training new staff.

“Our program represents the next generation of thinking around managing expenses.”

Five-year milestone for local Community Bank® branch

Elmore/Lockington & Districts Community Bank® Branch invite shareholders‚ customers and the community to take part in Lockington branch’s 5th birthday celebration between at 1pm and 2pm at the Lions/Apex Park on Wednesday 4th March 2009.

“Our fifth birthday will be a momentous occasion‚” Chairman David Johnson said.

“We have achieved everything that we set out to achieve when we embarked on our Community Bank® campaign.

“In business terms‚ our company and our branch is still in its infancy with community contributions and shareholder dividends being the tip of the iceberg.”

Some of the community organisations that have benefited from Elmore/Lockington & Districts Community Bank® Branch support include:

• Bamawm Golf Club
• Rochester United Cricket Club
• Lockington Channel Committee
• Elmore Golf Club
• Lockington Lions Club
• Lockington & District Bush Nursing Centre
• Mount Pleasant Netball Club
• Elmore Progress Association

David said since the branch’s inception five years ago‚ over $100‚000 in community contributions and shareholder dividends have been channelled back into the community.

“Our company really now is on the verge of making significant impact into the local economy as our business levels continue to increase” he said.

“This is borne out through locals continuing to shift their banking business across to the Community Bank® branch.

“Our local staff continue to provide exceptional level of service to our customers regardless of what business they wish to do. From travel insurance through to business loans and everything in between‚ we offer it all.

David said the branch has been trading profitably for three and a half years now and all indications are that this should continue into the future.

Elmore/Lockington & Districts Community Bank® Branch has banking business of more than $61 million and has opened more than 3190 accounts.

What a Ding Dong of a night!

In spite of extreme temperatures it was fantastic to see so many shareholders of Lockmore Financial Services Ltd bear the heat and attend the Elmore/Lockington & Districts Community Bank® Branch’s 5th Birthday Celebrations on Thursday 29th January 2009.

A crowd of 150 enjoyed a first class evening of food‚ wine and entertainment from celebrity Denise "Ding Dong" Drysdale. Providore on Hopetoun Lockington provided sumptuous gourmet finger food for the evening which was accompanied with wine or organic beer courtesy of Avonmore Estate Winery Elmore plus soft drinks and water from Pentreath’s Lockington. The Community Bank® was pleased to utilise these businesses continuing the ethos that "we support those who support us".

Guests were welcomed by Vice Chair Louise Ross‚ and also heard from both Chairman David Johnson and Branch Manager Andre Clayton. A presentation of achievements over the last five years was shown‚ and shareholders had the opportunity to have a close-up look at various marketing and promotional items that have been developed over this period.

The venue‚ Lockington & District Community Centre‚ looked spectacular decked out in black‚ white & silver and of course several splashes of 'Bendigo and Adelaide Bank' maroon & gold which set the mood for the evening.

Denise entertained all with her many comical tales and amusing impersonations as well as mingling amongst the crowd throughout the evening. A couple of highlights of the evening were: the participation of a local Elmore identity who rated Denise as 9 out of 10 after an up and personal close encounter and “Father” O’Brien who shared one of his dairy jokes with the audience.

The first five years of Community Banking in this district has been marked with a celebration to thank all for their strong support of this local community owned business. Best wishes to all for continued success - where 'local accounts mean local profits and local growth.'

Bio-diesel target a step closer

The North Central Victorian Community Enterprise has reached its pledge target‚ with locals throwing support behind plans to construct a community-owned fuel depot in the district.

The community is working in partnership with Bendigo Bank‚ Victor Smorgon Group and Atlas Fuels to establish a fuel distribution business.

Chair of the North Central Victorian Community Enterprise steering committee and Elmore farmer‚ David Johnson‚ said under the proposed model‚ the community would own the local storage facility and be able to capture some of the profits associated with fuel purchases.

“This facility would be put in place using a similar business model to the Community Bank®‚” he said.

Like the Community Bank®‚ this initiative would bring huge benefits to our region. It would return profits and secure a supply of liquid fuels‚ including access to Bio-Fuels‚ to our remote communities.”

Mr Johnson said support has come from far and wide.

“Our neighbours in Goornong‚ Colbinabbin‚ Tongala‚ Rochester‚ Prairie‚ Lockington‚ Pyramid Hill‚ Calivil‚ Dingee‚ East Loddon and Serpentine are all keen to get behind the project.”

“This is a significant development that highlights that the community has been able to rally around a community cause that will see the construction of a local fuel storage facility in the district‚” he said.

The community hopes that in the future the storage facility will grow to incorporate fuel production‚ generating a sustainable revenue stream and fuel source in North Central Victoria.

An independent feasibility study will now test the level of pledge support.

“More than 150 locals have pledged to purchase their fuel through the community-owned structure‚” Mr Johnson said.

“These people will now be contacted and interviewed to confirm the viability of the project.”

The North Central Victorian Community hope to have the facility in place by this year’s harvest in October.

This is the second time the Elmore and Lockington communities have rallied together to improve facilities in the region. Almost five years ago‚ the communities ran a successful Community Bank® campaign establishing branches in both towns.

By returning banking services to the area‚ the Community Bank® branches ensured that profits generated were put back into local groups and projects. Since their opening‚ the two branches have amassed a combined banking business exceeding $54 million‚ paying dividends to local shareholders and will soon be returning $20‚000 to the community.

Anyone interested in registering their support for this project can contact the Elmore and Lockington Community Bank® Branches or Bendigo Bank on 1300 304 541.

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